Month: January 2015

The Week in Economic and Real Estate News The Canadian Real Estate Association published national December sales data last week which showed that activity in December, although down from November’s level, was about 8% higher than in December, 2013.

More than 481,000 resale homes changed hands in Canada in 2014, the highest level in seven years. Average home prices in Canada grew by 3.8% in 2014 and the MLS Home Price Index advanced by 5.4%. Royal LePage published its latest House Price Survey last week which calls for home prices in Canada to gain an average of 2.9% in 2015.

The national realtor suggests that recent weakness in energy prices will be a benefit to markets in central Canada and may cause some western markets to slow and create better opportunities for buyers.

The Calgary Real Estate Board published its annual forecast last week which predicts that sales volumes will fall by 4% this year while average prices in Calgary will stay on the positive side with a projected gain of 1.58%. The last Teranet House Price Index reading of 2014 was released last week. The index slipped by 0.2% in December but the annual gain came in at 4.95%.

The benchmark government of Canada five year bond yield ended the week at 1.09%, down from 1.22% the previous week.

1. More mortgage restrictions to come With Ottawa paring down its mortgage exposure, the Bank of Canada estimating up to 30 per cent overvaluation in Canada’s housing market, over-indebted consumers and average home prices incessantly breaking records, policy makers will restrict the mortgage market yet again. New limits on government-backed mortgage funding will make it more expensive for lenders to fund mortgages, or new underwriting rules will make it harder to qualify for a mortgage. Maybe both.

2. Record discounts for variable mortgage rates Lenders’ funding costs should continue to improve for variable-rate mortgages in the next twelve months. As a result, we’ll see a small number of lenders and/or brokers advertising discounts better than prime minus one per cent before the end of 2015.

3. Brokers will break into three camps Mortgage brokers will split into three camps in 2015: Full-service brokers who create detailed mortgage plans to support one’s financial goals, online mortgage brokers who provide less advice for a lower rate, and your run-of-the-mill everyday broker. That latter type will suffer job losses in 2015 as their rates and service offerings prove uncompetitive relative to other brokers, banks and credit unions.

4. A glut of private money Alternative mortgage lenders – such as mortgage investment corporations (MICs) – will grow flush with cash, as investors chase higher yields and as Ottawa’s stricter mortgage rules create opportunity for them. That abundance of capital will motivate sub-prime lenders to take more risk in search of higher returns. In turn, we’ll see some of them offer mortgages with only 10 or 15 per cent down, instead of the traditional 20 to 25 per cent equity The result: Credit-challenged consumers will have more lending options at lower interest rates.

5. Brokers will pitch you other stuff Don’t be surprised if your mortgage broker offers you other financial products. Declining margins will motivate many brokers to diversify their revenue streams. They’ll take a page from banks’ playbooks and cross-sell you everything from GICs, to insurance, to credit cards, to RRSPs.